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Simon Hunt: The Fed’s Choice is Simple – Hyperinflation or Recession

Tom welcomes back Simon Hunt to discuss the global economy and the rapidly declining trust between governments.

Simon notes that global trust is rapidly disintegrating, and often that trust is replaced by war. The Western economies are quite likely to flat line or enter into recession by the end of the year. Central Banks are more fearful of recession trends than inflation. In the end, their choice is either hyperinflation or recession. This winter we will see huge food inflation, driven both by policy and environmental problems. The world is going to have moderate growth, but inflation will be persistent across everything. It is human nature to stock up when prices are rising, which will exacerbate supply problems.

Russia has determined that the West will not listen to their concerns. Therefore, they are taking steps to ensure their own survival. The American policy is clearly to control and collapse foreign economies. The BRICS nations have been trying to create alternatives to the West’s systems. Simon is concerned with how America will respond when alternative currencies appear. Saudi Arabia has announced their intention to join the BRICS.

Putin has recently stated, “The economy of mythical entities is inevitably being replaced with one of real value and assets.”

The pivot from the dollar has been in place for some time. Fed policy is only going to accelerate the process. By the middle of 2023 we will probably see a big fall in the dollar index. This will happen when Russia, China and others start operating with a new currency.

Commodities under a new BRICS currency system will be used as a benchmark, and this will include gold.

Tensions are likely to continue to worsen between China and the United States. When empires historically fail they are left with one option which is war. The U.S. is militarizing countries around China, including Taiwan. They are openly calling for Taiwan’s independence. China wants to avoid war, as the next government in Taiwan is likely to move closer to China.

Simon discusses commodities and where copper will likely head over the next couple of years. The LME has become very much a casino. He believes volatility will continue across all commodities. Managing and hedging that volatility will be crucial.

Time Stamp References:
0:00 – Introduction
0:53 – Energy & Inflation
8:24 – Conflict Period
13:50 – Putin Quote
16:46 – Inflationary Seeds
20:54 – NATO, Russia, & China
24:00 – Dollar Decline & Copper
35:27 – Copper Market Pricing
37:23 – Commodity Volatility
40:08 – Geopolitics & Timelines
43:00 – Food Scarcity
45:42 – Wrap Up

Talking Points From This Episode

  • Why global trust is disintegrating and risks of war are increasing.
  • How will the West react to new currency systems that compete with the dollar.
  • Outlook for copper and commodities in general.
  • Risks of a recession and dollar decline starting next year.

Guest Links:

Simon Hunt began his career in 1956 in Central Africa as a PA to the Chairman of Rhodesian Selection Trust, one of the two large copper companies in what was then Northern Rhodesia, now Zambia.

In 1961, he came back to London and joined Anglo American Corporation of South Africa as a PA to one of the Board Directors, followed by being part of a small sales and marketing team for copper. From there, he helped start up a new copper development organization, CIDEC, financed by copper producers, which he then joined, focusing on conducting end-use studies of copper in Europe.

He then went into the City to gain financial experience and founded Brook Hunt in 1975. He was instrumental in setting up the company’s cost studies and end-use analyses. Simon appeared as material witness and consultant in two ITC anti-dumping cases in 1978 and 1984, winning both at the commission level.

He has spent 2-4 months every year in China since 1993, and until a few years ago would be visiting some 80 wire and cable and brass mill factories across the country every year. He now restricts these factory visits to a smaller number, all of which he has known for many years. Simon also spends many weeks each year traveling around Asia.

The focus of the company’s services is on the global economy, including the changing geopolitical and financial structures, China’s economy and its copper sector, and then the global copper industry as each part is interconnected.

Simon is the author of the “Frontline China Report Service,” which is marketed by the TIS Group. The Service provides regular reports on China’s economy, politics, and financial outlook.

Simon established this company in January 1996.

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